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Buyers seeking smaller and more affordable homes, property professionals report

Some property professionals are seeing trends towards home buyers looking for smaller, more affordable homes and people moving out of older homes to buy more energy-efficient new-builds, according to surveyors.

Overall, there are signs that buyer demand remains subdued in the face of relatively high borrowing costs, the Royal Institution of Chartered Surveyors (Rics) said.

Its April market survey of the UK property market found that a net balance of 37% of professionals reported demand from buyers falling, rather than rising.

A net balance of 19% of surveyors reported seeing house sales falling rather than rising, although this was an improvement compared with a balance of 30% who saw this the previous month.

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It represented the least negative reading on the sales measure since July 2022, Rics said.

New instructions to sell were broadly flat, with the survey pointing to a slight decline in fresh properties coming to market.

The recent decrease in demand and sales resulted in a slight increase in the average number of properties held on estate agents’ books, at 36 homes on average for each agent, compared with 35 in February and March.

The survey also pointed to a downward pressure on house prices, with a net balance of 39% of professionals seeing prices fall in April, although this was less negative than survey results recorded in March and February.

Looking to the 12 months ahead, a net balance of 16% of surveyors expect prices to fall rather than rise.

The report quoted the views of property professionals, with one saying: “More people are buying smaller homes due to affordability, we are seeing an increase in people moving out of older homes to buy more energy-efficient new homes.”

Another said: “The residential market has undoubtedly hardened.

“The top end of the market has been particularly badly affected with noticeably fewer sales being achieved at lesser figures than last year.”

In the rental market, tenant demand increased overall in the three months to April, while instructions from landlords fell, Rics said.

With demand continuing to outstrip supply, rental prices are expected to increase over the next few months.

Simon Rubinsohn, Rics chief economist, said: “Most notably, buyer demand still appears to be subdued in the face of relatively high borrowing costs, the prospect of at least one more interest rate hike and ongoing affordability challenges.

“Meanwhile, the imbalance between demand and supply in the letting market still remains stark despite the significant increase in rents.

“Critical to addressing both areas of the market is the delivery of more supply.

“However, indicators of the level of new housing starts in the early part of the year suggests that the picture is, if anything, continuing to soften as housebuilders’ activity reflects both macro uncertainty and policy developments.”

Samuel Rees, Rics senior public affairs officer, said: “Demand for rental homes remains high, but stock remains low, and landlords are increasingly exiting the market – which is translating into higher rents.”